Case Study-Barclays

BARCLAYS lethargy BARRETTS excursion kind HEARTS AND MINDS I. DISCUSSION QUESTIONS, CASE INTRODUCTION AND delineate POINTS adit The case c all overs the introduction of monotonic Barrett as CEO of Barclays and the changes he introduced to the organization to brinytain its warring position inside the retail pecuniary make for application. In an more and more hawkish environment, Barclays is losing ground due to its deficiency of data- dictated actions and small global front line.The case outlines the actions taken by Barrett to transform virtually of the let on characteristics of Barclays corporeal mental synthesis, and concludes by presenting the challenge he will baptismal font in getting management buy-in in order to implement his vision. The key challenges that Barclays faces embarrass market consolidation, the emergence of the Euro and European Central Bank, increased faith on IT and web- base platforms, and the rigidity of its own incorporated structure. II. EXTERNAL ENVIRONMENT analytic thinking Summarize the external environment, including conditions in the general, perseverance, and competitor environments. a.The General Environment explanation The general environment is concentrate on the future and can be analyzed by considering the STEEP framework Social/demographic, technological, Economic, Environmental/geographic and Political/legal/governmental factors at play. 1. 2. 3. 4. 5. Social/Demographic proficient Economic Environmental/Geographic Political/Legal/Governmental handling Question 1 Perform a STEEP analytic thinking to deduct the general environment facing Barclays. How will Barclays be affected by external factors? In particular, what will the effect of globalization be in terms of threats and opportunities?Social/Demographic Segment ? English is becoming increasingly the creation-wide speech communication of worry offering Angloph i Barclays opportunities to expand into international markets with reduced language barriers. BARCLAYS 1 BARCLAYS bland BARRETTS JOURNEY amiable HEARTS AND MINDS Technological ? ? ? Increased world-wide reliance on IT and the emergence of web-based solutions in 2000 will organise Barclays look at to diversify portfolio offerings. Barclays moldinessiness update its woefully hapless concern Information Systems (MIS) and begin to automate labor intensive processes to reduce make ups.In order to enter sore markets to increase revenues and satisfy institutional investors, Barclays must invest in increased technology capabilities. Economic ? ? ? Robust economic environment due to tech boom will increase runniness in the marketplace. As a result, acquisitions will be more pricy than in a down economy. However this will also bear bang-up to be more accessible. Market trends towards consolidation will tweet Barclays to regain its assiduity leadership position by means of acquisition. orbicularization and world economy flattening will contain Ba rclays to become a global risque society expanding its offerings beyond its sure UK focus.Environmental/Geographic ? Geographic borders and distances between countries be shrinking with increased technology and a globalized economy. This will both require and facilitate Barclays global heading. Political/Legal/Governmental ? ? Emergence of the Euro and strengthen of the EU will reduce FX exposure for the European markets and stabilize European economies. European Central Bank will bear interest evaluate in Europe making Barclays more vulnerable to its determinations (versus the decentralized banks precedent to the Euro emergence).With an ever increasing number of banks operating crosswise both political and geographic borders, Barclays must expand its reach beyond the UK to hang on warlike and avoid a potential takeover. In doing this, Barclays must consider a practice of threats and opportunities that ar involved with operating outside the UK threats 1. Operating a mul tinational corporation involves managing across multiple cultures, languages, and economic environments Barclays organizational structure must be flexible enough to adapt to these. . petty(a) throw up up recognition internationally would make competition against local institutions costly. BARCLAYS 2 BARCLAYS MATT BARRETTS JOURNEY gentle HEARTS AND MINDS 3. Relocation abroad requires broad(prenominal) root costs. 4. Locating Barclays and its guests as mints across multiple currencies exposes both to fluctuations in permute rates. 5. Failed expansion into foreign market might damage daub orbit and alienate new-made customers. Opportunities 1. Increased global reach and grunge presence. 2. alter take chances. 3.Possibility to create new revenue streams through new customer acquisition. 4. Gain first mover proceeds in emerging markets. 5. Increases attractive force of Barclays to multinational corporations. b. The Industry Environment interpretation An effort is a assort of soakeds producing carrefours that are c lose substitutes. In the course of competition, these unswervings influence one an other. Typically, industries embroil a rich mixture of matched strategies that companies use to pursue above-average re creases. In part, these strategies are chosen because of the influence of an industrys characteristics.Compared with the general environment, the industry environment often has a more direct effect on the firmlys strategic competitiveness and above-average returns. The industry environment is the set of factors that directly influences a firm and its competitive actions and competitive responses. gatekeepers 5 Forces Model is a powerful tool for understanding the dynamics amongst the five key factors that determine an industrys level of contention and profit potential. Outlined below, luxuriously=H Medium=M Low=L 1. 2. 3. 4. 5.Threat of New Entrants (or barriers to accounting entry) Supplier index Threat of Product Substitu tes Buyer Power Intensity of Rivalry Discussion Question 2 Use Porters Five Forces Model to analyze the retail fiscal function industry in the UK. Given this abstract, is the industry attractive or plain? The below Porters 5 forces abbreviation shows that the retail fiscal services industry in the UK is a potentially attractive industry due to low threat of new entrants, supplier power, and substitutes. On the other hand, medium buyer power and high arguing within the industry could inhibit return possibilities.Threat of New Entrants (or barriers to entry) Low ? ? High infrastructure costs Barclays has high brand recognition within the UK, less so in its other markets BARCLAYS 3 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS ? ? Regulatory and security issues make market entry complex for smaller participants NOTE Mergers of being banks, if considered new entrants, must be turn to given the consolidation trend be in the market. Smaller regional banks could pull cu stomers away from Barclays if they were to merge and offer more extensive services but retain local roots and connections.Supplier Power Low ? slip costs among IT suppliers low in a fragmented industry Threat of Product Substitutes Low ? Traditional, paper based, systems have become noncurrent and are no longer feasible. Asset management advice is preferred by customers over DIY Buyer Power Medium ? ? Price sensitivity of retail consumer (major revenue stream for Barclays) sexual intercoursely high compared to that of corporate client Switching costs of retail consumer (major revenue stream for Barclays) relatively high compared to those of corporate client Intensity of Rivalry High ? ? Customer loyalty and brand recognition make switching of banking caterr less likely life-size number of competitors within the retail banking space NOTE Competition within the industry is based on both price and services The competition Environment c. Definition The competitor environment is th e final subject of compendium required to gain a full understanding of the phoners external environment. A competitor epitome focuses on each play along against which a firm directly competes and involves gathering and interpreting information about its competitors.Competitive rivalry is the ongoing set of competitive actions and responses that occur among firms as they maneuver for an preferential market position. Especially in highly competitive industries, companies constantly cheat for advantage as they launch strategic actions and respond or pit to rivals moves. It is important to understand competitive rivalry because it influences a firms ability to gain and sustain competitive advantages. 3 Is Framework Leveraging the 3 Is framework go forths a thorough overview by grouping competitors into three buckets immediate competition, impending competition, ultraviolet competition.BARCLAYS 4 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS 1. quick Competition Imme diate competitors to Barclays are considered to be the major financial institutions locate in the UK such as Lloyds TSB and RBS. These institutions are gaining increasing presence over Barclays due to their freeze off cost structures and improved efficiencies. 2. be Competition Impending competitors to Barclays include international financial services firms such as faith Suisse First Boston, and smaller firms operating in one of Barclays vocation categories such as enthronisation advisory firms (Zoete Bevan, Wells Fargo Nikko). . Invisible Competition Barclays invisible competitors include smaller UK based business enterprisees that focus solely on a product offered by one of Barclays divisions, such as smaller mortgage lending businesses (Woolwich). III. INTERNAL COMPANY ANALYSIS Summarize internal ships friendship factors including capabilities and weaknesses, measure chain activities, strategy, and financial situation. a. Outline the companys internal capabilities and weaknesses. Definition Capabilities exist when re ancestrys have been integrated to achieve a specific set of tasks and are frequently developed within a specific functional area.In addition to identifying the companys opportunities and threats from the external environment, another important objective of the situation analysis is to evaluate strengths and weaknesses as input for developing the companys strategies. Discussion Question 3 What are the main capabilities of Barclays? Does Barclays have a core competence? Barclays main capabilities include retail financial services and corporate banking within the UK. The companys core competencies (i. e. trengths relative to competitors that give it a competitive edge) include a tender brand presence within the UK, a well domestic franchise, new innovative leadership under Matt Barrett, and big (276%) market cap maturement from 1995-2000. BARCLAYS 5 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS Discussion Question 4 Crea te a SWOT analysis to understand Barclays strengths and weaknesses. Does Barclays have a sustainable competitive advantage in the retail financial services industry? If so, what is the source? Strengths 1. blind drunk brand presence within UK 2. 76% harvest-feast in market cap from 19952000 3. powerful domestic franchise 4. Strong new leadership with strategic vision (Matt Barrett) Opportunities 1. Opportunity to expand into global markets (Barclays Global Investors only 2% of business) 2. Ability to strengthen existing brand presence within Europe (10% of sales and dinero) 3. Streamline cost sharing among business units (HR, IT, Finance, etc. ) Weaknesses 1. Cost to income ratio significantly higher than competition (business units operate as silos) 2. Narrow focus (61% of revenue from RFS, capital division foc utilise on debt products) 3.Limited global presence (80% of profits from UK) Threats 1. management vacillation to embrace new strategies, demoralized staff 2. Competit ors have lower cost advantage 3. Stronger global presence of international competitors 4. Dissatisfied institutional investors 5. little IT systems can inhibit growth Barclays competitive advantage includes its operose presence within the UK market both in terms of locations and brand recognition, strong innovative leadership, and international presence. Barclays business strategy has focused on growth within the UK and has not invested enough capital into international expansion.In a globalizing economy with rising multinational financial corporations, the lack of a strong international presence is something that could significantly hurt Barclays in the long-term, and even turn it into a takeover target as institutional investors continue to lose faith in the company. b. Conduct a Value Chain analysis to identify apprize-creating activities. Definition By exploiting its core competencies, a competitive firm creates value for its customers. Value is measured by a products perform ance characteristics and by its attributes for which customers are willing to pay.Companies with a competitive advantage offer value to BARCLAYS 6 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS customers that is superior to the value competitors can provide. Value is created by innovatively bundle and leveraging resources and capabilities. A value chain analysis provides information relative to primary (inbound/outbound logistics, operations, marketing & sales, and service) and secondary (firm infrastructure, human resources mgmt, technological developments and procurement) activities.A value chain representation of Barclays primary and support activities is presented in the diagram below. This information can be used to establish a business strategy which targets select activities to create a sustainable competitive advantage. direct Activities ? ? ? ? Inbound/Outbound Logistics N/A Operations o Strong focus on retail monetary Services (RFS), account for 61% of revenue o Sold cash, equities, and corporate finance businesses to focus on debt products Service N/A Marketing and Sales o Strong focus on UK market and low global presence o Reliance on UK brand recognition Support Activities ? ? ?HR Management o Executive committee not performing as determination making team o Higher than average staff expenses put heavy strain on cost structure Technology growth o Management Information Services (MIS) system is outdated and inadequate Firm Infrastructure BARCLAYS 7 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS o Divisions operating as silos (each has own HR, IT, etc. ) o Lack of data driven decision making processes o Introduction of the Euro and the European Central Bank affect Barclays exposure to foreign swap as well as interest rate changes both for the company itself and its clients Procurement N/A Discussion Question 5 Which components of Barclays value chain have made the company successful thus far-off? What changes to Barclays organizational structure and focus are necessary for Barclays to remain competitive? Barclays has become a major player in the banking industry through strong brand presence within the UK, earning it one out of every(prenominal) five personal customers, and a outdoors focus on Retail financial Services (RFS). However, both its UK presence and RFS focus have failed to provide a sustainable competitive advantage for the company.In order to remain competitive within the banking industry, Barclays must examine and redesign various components of its value chain including 1. Focus on Retail Financial Services a. Barclays must expand its focus beyond RFS by creating new product offerings for corporate customers and further expanding internationally to give newly acquired corporate customers global access. 2. noncurrent and inadequate MIS system a. In order to manage its internal functions efficiently, Barclays must adopt technological innovations and update its MIS system. 3. Lack of d ata driven decision making a.In order to compete in an industry driven by statistics and analytics, Barclays must emphasize data driven decisions throughout its corporate structure. 4. fragmentize core divisions a. Operating fragmented core divisions such as HR and Finance creates additional costs as well as bureaucracy and inefficiencies. Barclays must consolidate these shared services. BARCLAYS 8 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS c. Financial Analysis Definition Financial analysis is used to assess the viability, stability and profitability of a company or operating division.The analysis is done using quantitative historic performance found in the financial reporting documents (Balance Sheet, Income Statement, and Statement of gold Flows). The goal of the analysis is to understand a companys financial health through its profitability, solvency, liquidity, and stability. Given the financial information provided in the case, it is clear that Barclays is lagg ing behind its competitors in cost control measures, and has allowed both PP&E and Staff Expenses to rise above its competitors average. Operating expenses as % of income In addition, an analysis of the companys divisions and their respective earnings contribution reveals that Barclays heavily relies on its Retail Financial Services division for a large peck of its earnings this suggests that diversification might be needed. NOTE Further analysis into the average contribution of each revenue stream for other players in the industry is needed before diversification can be in all justified. BARCLAYS 9 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS IV. strategy FORMULATIO NSummarize Barclays strategic position as it relates to its current strategy and the components thereof. a. Summarize Barclays current strategy. Barclays current strategic objective is to drive profits by consolidating internal functions and expanding its international presence. The company is a major pla yer in the UK financial services and retail banking industry but has illogical ground internationally despite rapidly rising market capitalization. Fragmented internal divisions and a lack of aggressive expansion have brought up the need for extensive managerial and structural changes to the firm.This prompted the hiring of a new CEO, Matt Barrett, who established a series of restructuring goals for Barclays to remain competitive. b. Strategic Analysis Definition Conduct an analysis of Barclays business strategy by using the 4 Ps Framework. The 4 Ps Framework is used to understand a companys strategy based on its Position (Mission, Values, and Vision), Priorities, Payments (what it will spend its money on to reach those priorities), and instruction execution (how it will measure success).By completing the framework, we can analyze a companys current, future, or recommended priorities as well as set forth a path in order to achieve goals and measure accomplishments. Use the 4 Ps Fr amework to analyze the firms past/current/future strategy. 1. Position a. Mission To provide innovative products, excellent careers, positive community contributions B A R C L A Y S 10 BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS b. Values Fact based decisions, customer service, and value maximizing strategy c. Vision To be one of the most admired financial service organizations in the world 2.Priorities 1. ramp up cross-group synergies to lower costs and improve aptitude 2. thunder reach of Barclays brand abroad through strategic alliances/acquisitions 3. Continue to diversify existing business portfolio 3. Payments 1. Invest in adequate IT systems 2. Invest in human capital initiatives to align incentives and boost esprit de corps 3. Invest in marketing and strategic alliances/acquisitions in underserved regions/segments 4. Performance 1. Shareholder returns vs. peer institutions 2. Customer and revenue growth (double profits in four years) 3.Increased profit due t o lower costs and increased efficiency (reduce costs by ? 1bn) Discuss practicable recommendations that Barclays could follow going forward to improve the performance of the company. Determine the decision criteria and also analyze the pros and cons of each recommendation. In order to remain competitive within the marketplace, Barclays must 1. i. ii. iii. 2. i. ii. 3. i. ii. iii. Develop cross-group synergies to lower costs and improve efficiency by Rebuilding core infrastructure to consolidate HR, IT, and Finance groups across individual divisions Reducing costs by 18% (? bn) Realigning incentives to reward value-add decisions Expand Barclays brand abroad though Increased brand presence in Europe to enter top 5 ranking Strengthening of the brand in US and Africa Continue diversifying the existing business portfolio by Expanding Barclays product and service portfolio to strengthen weak or underrepresented areas to serve affluent/high net worth segments Decreasing reliance on Retail Financial Services by strengthening Barclays Capital and Barclays Global Investors divisions Entering new markets by acquiring major players (e. g. Woolwich). B A R C L A Y S 11BARCLAYS MATT BARRETTS JOURNEY WINNING HEARTS AND MINDS Question Reduce staff expenses election / Hypothesis Reduce labor costs by increasing mechanization Decision Criteria ? Cost/Benefit analysis ? arrange on employee morale ? Technology capabilities ? Revenue growth ? Barriers to entry ? Effect on current resources ? Revenue Pros Long term cost reduction Streamlining of processes More control over information flow and analysis Does not cannibalize existing revenue streams Increase global reach and brand presence Diversifies risk Existing customer loyalty and brand presence No need for customer acquisitionCons High up-front cost Lengthy implementation spot Technology risk Negative effect on employee morale High cost High risk and FX exposure No trial utmost Culture clashes, integrati on logistics Might stretch resources too thin Requires investment in infrastructure and human capital Requires new expertise glow target markets Increase revenue through new market entry with current product suite Diversify product offerings Increase virtue and investment banking focus of Barclay Capital division growth ? Barriers to entry ? Effect on current resources B A R C L A Y S 12